Iraq battles to expand its oil exports

BAGHDAD, Oct. 5 (UPI) -- Iraq, which sits on vast untapped oil reserves, is driving hard to build up its crude exports that will pay for reconstruction and is set to inaugurate the first of three new terminals in the northern Persian Gulf Jan. 1.

But there's a lot of work ahead before the country, still torn by political sectarian violence as U.S. forces withdraw, can exploit its enormous oil potential at a time when most producers are watching reserves shrink.

Government data indicate Iraq has some 70 known fields that have recoverable reserves estimated at 143.1 billion barrels and proven natural gas reserves of 127 trillion cubic feet.

But only 20 of the oil fields, including nine mega-fields with reserves of more than 5 billion barrels, have been developed and are producing.

On top of that, many parts of the country haven't been explored, so the final tally could well be far higher than the totals listed.

Most of Iraq's oil reserves -- around 122 billion barrels -- lie in the south.

But some industry analysts say that deep oil-bearing formations mainly in the Western Desert region could yield additional resources, possibly up to another 100 billion barrels.

To accommodate this massive increase in production, Iraq has embarked on a $50 billion plan to upgrade and expand its largely antiquated oil infrastructure that has been run into the ground from decades of inept management, international sanctions and wars.

This includes a whole new network of pipelines to replace the rusting system that has served the industry for decades.

All told, the plan is expected to add some 4,370 miles of pipeline to the 7,000 miles already crisscrossing the country.

New gas pipelines are also on the agenda as Baghdad plans to harness its largely unused gas reserves to boost power production and start exports.

Eight years after the U.S.-British invasion in March 2003 that toppled the brutal regime of Saddam Hussein, Iraq's long-neglected and war-battered energy industry is gradually restoring oil production and is about to embark on harnessing its vast natural gas reserves as well.

Current output is around 2.7 million barrels per day, 15 percent up on the same period in 2010.

Some 2.18 million bpd of that was being exported in August, with 1.73 million bpd via the two elderly offshore terminals in the south that are woefully inadequate to cope with the planned production increase over the next few years.

The new terminals, linked by 37-mile pipelines to the southern port of Basra, will each have a capacity of 900,000 bpd to handle the crude produced from the southern mega-fields that include Rumaila, West Qurna and Zubair around Basra operated by Royal Dutch Shell, BP, Exxon Mobil, Russia's Lukoil, Italy's Eni and the China National Petroleum Corp.

When completed, the $1.3 billion project will give Iraq an additional combined export capacity of 2.7 million bpd, more than double the current capacity.

A fourth terminal with a single-point mooring for tankers is planned, with expectations of adding a fifth at some point.

If all five become operational, said Dhiya Jaafar of the state-owned South Oil Co., "we'd have an exporting capacity … of 4.5 million bpd … from Basra alone."

Iraq exports some 500,000 bpd to Turkey's Mediterranean terminal at Ceyhan from its northern fields at Kirkuk.

The Oil Ministry had declared it planned to boost production to a staggering 10 million-12 million bpd by 2017, to surpass even Saudi Arabia, the world's biggest producer with a current output of around 9 million.

But most industry insiders figured that target was overly ambitious and far beyond Iraqi capabilities, even with the arrival of international companies with advanced drilling technology in 2010.

The ministry has downgraded its target to 7 million-8 million bpd by 2017 and says that could be sustained for 13-14 years rather than the six-seven year timetable under the original target.

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